Friday, October 19, 2018

Weekly Digest

The Latest Round of FTC Competition and Consumer Protection Hearings

 You’re reading the Benton Foundation’s Weekly Round-up, a recap of the biggest (or most overlooked) telecommunications stories of the week. The round-up is delivered via e-mail each Friday.

Round-Up for the Week of October 15-19, 2018

The Federal Trade Commission this week held another set of hearings on Competition and Consumer Protection in the 21st Century. 

The hearings and public comment process this Fall and Winter will provide opportunities for FTC staff and leadership to listen to experts and the public on key privacy and antitrust issues facing the modern economy. The hearings are intended to stimulate thoughtful internal and external evaluation of the FTC’s near- and long-term law enforcement and policy agenda. The end goal is to identify areas for enforcement and policy guidance, including improvements to the agency’s investigation and law enforcement processes, as uncover areas that warrant additional study.

This week was hearing #3, a three-day event that examined 1) the potential for collusive, exclusionary, and predatory conduct in multi-sided, technology-based platform industries, 2) the approach to addressing antitrust issues regarding labor markets, and; 3) antitrust frameworks for evaluating acquisitions of nascent competitors or occurring in nascent markets, including in the technology and digital marketplace.

Day 1

The agenda on October 15 focused on the potential for problematic behavior on multi-sided platforms — companies that bring buyers and sellers together, like Amazon or Airbnb.

The discussion came as the European Union opens a preliminary investigation into Amazon’s dual role as both a platform and a merchant selling products. “This is an educational opportunity for all to better understand the business models that are driving the US economy,” said Marianela López-Galdos, director of competition at the Computer and Communications Industry Association (CCIA), a lobbying group which counts Amazon among its tech members. “These hearings are also an opportunity for the FTC to look at the US model and how that has worked for both the economy and consumers as there is unprecedented pressure to import European regulations here.” 

FTC Commissioner Rohit Chopra gave opening remarks before panelists discuss the characteristics of the companies and how the agency should evaluate conduct like predatory pricing and actions to undermine rivals who depend on their infrastructure. Commissioner Chopra’s remarks set the tone for the hearing:

Commissioner Chopra focused on how digital marketplaces harvest data and how operators set the rules for buying and selling in the marketplaces. Noting that mass data collection and analysis can be used to form individualized pricing, Chopra said the FTC must learn more about companies’ data collection practices, their use of predictive analytics, and how data is monetized.

Without naming any companies outright, he also raised questions about how marketplace operators can set the rules to benefit their bottom lines, like requiring a seller to pay more for premier placement. “Shedding light on how marketplaces and platforms engage in data collection and analysis, as well as how their rules and regulations promote or impede the competitive process, will be a great contribution to advancing the Federal Trade Commission’s mission and developing policy that will make sure our markets are truly working,” Chopra said.

Panelists, though, were not shy about calling out big tech companies. Ben Thompson, who writes the tech newsletter Stratechery, offered ideas for regulating Facebook and Google — in particular by preventing them from buying up potential competitors. “I consider the greatest regulatory failure in the internet era [to be] Facebook acquiring Instagram, and part of the problem was there was no framework to say why they shouldn’t be allowed to,” Thompson said. And early Facebook and Google investor Roger McNamee said antitrust action against the companies is “the best and most pro-growth remedy available.”

Day 2 

On Day 2, government officials, scholars, and industry insiders discussed possible anticompetitive behavior in labor markets. Those who testified included Renata Hesse, a former Justice Department antitrust chief, and Tim Wu, the Columbia University Law school professor who coined the term “net neutrality”. The day's discussion focused around five questions:

1. Is a lack of competition among employers a significant contributor to observed macroeconomic trends in labor markets, such as the declining labor share and/or real wage stagnation? What are other explanations for these trends?
2. How should the agencies approach defining relevant labor markets for purposes of antitrust analysis? What (if any) reliable evidence is available on the existence and effect of employer concentration in properly defined labor markets?
3. Does available evidence suggest a causal relationship between employer concentration and labor market outcomes, such as wage?  Does this evidence suggest a change in antitrust enforcement is needed?
4. Should the agencies and courts apply the consumer welfare standard to the analysis of monopsonistic labor markets in which firms are buyers and workers are sellers? 
5. How should the agencies and courts resolve cases where evidence suggests output in the product market is likely to increase but employment and wages are likely to decline because of reduced competition in a properly defined labor market?

The day's first panel addressed monopsony, a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers. The second panel explored labor markets and antitrust policy. Another discussion explored the lessons of U.S. v. Microsoft teaches antitrust policy and the approach to multi-sided platforms. The day's final panel, which included former-FTC Commissioner Joshua Wright, asked -- Do the U.S. and Europe Treat Competition Cases Involving Platforms Differently?

Day 3

On Day 3, participants delved into acquisitions in digital technology markets, featuring remarks from Stanford Graduate School of Business economist Susan Athey and attorney Paul Denis, who specializes in merger litigation and antitrust law. The panels also looked into whether existing antitrust law is sufficient for dealing with the challenges posed by nascent and upstart technologies, and whether regulators need to beef up enforcement efforts in such instances. These discussions centered around these questions:

1. What is the appropriate antitrust framework to evaluate acquisitions of potential or nascent competitors in high-technology markets?
2. Is current antitrust law sufficient for developing challenges to these types of acquisitions?
3. How should the antitrust agencies evaluate whether a nascent technology is likely to develop into a competitive threat in dynamic, high-technology markets?
4. What are some pragmatic approaches that the antitrust enforcement agencies could consider for enhancing their evaluation of these types of acquisitions?

Upcoming FTC Hearings

• Oct. 23-24, 2018 -- Hearing # 4: Innovation and Intellectual Property Policy
• Nov. 1, 2018 -- Hearing #5: Vertical Merger Analysis; the Role of the Consumer Welfare Standard in U.S. Antitrust Law
  • Of note: Benton Senior Fellow Jonathan Sallet will be participating in a panel and presenting on "Alternatives to the Consumer Welfare Standard"
• Nov. 6-7, 2018 -- Hearing #6: Privacy, Big Data, and Competition
• Nov. 13-14, 2018 -- Hearing # 7: Algorithms, Artificial Intelligence, and Predictive Analytics

The public is welcome to comment on these issues. Comments can be submitted electronically until December 15.
 

Kevin Taglang
Executive Editor, Communications-related Headlines
Benton Foundation
727 Chicago Avenue
Evanston, IL 60202
847-328-3049
headlines AT benton DOT org